But the night before closing on the loan, a relative offered a tip - ask their bank about a new kind of loan that covers rehab costs without the usual big boost in mortgage payments.

Fannie Mae, the quasi-government agency, offers what it calls a HomeStyle loan that wraps rehab costs and mortgage payments into one loan.

And although the loans are available across the country, not all banks offer them, and even banks that do may not actively market them to borrowers.

"We'd looked in all the usual places," recalls Mrs. Regan. "But as I called each bank, this alternative was never suggested."

Fannie Mae offers nine different HomeStyle loans, ranging from one designed for home buyers to loans aimed at low-income homeowners.

For home buyers, a HomeStyle loan wraps acquisition and rehab costs into a conventional mortgage at one mortgage rate - currently about 7 percent.

Homeowners who want to rehab their homes can get the same conventional HomeStyle loan, rolling rehab costs into a refinanced mortgage, again at primary rates rather than the higher rates - currently above 10 percent - traditionally tacked onto second or third mortgages.

"It was very convenient, rolling everything into one monthly payment and lowered the interest we'd been paying on the second loan," says Regan, who hopes her half-completed home expansion will conclude this summer.

Several banks have partnered with Fannie Mae to offer HomeStyle loans, especially useful in older metropolitan areas where old homes are both attractive and challenging with rehab needs.

Loan variety

HomeStyle's basic mortgage carries fairly high limits: $240,000 for single family houses; $461,350 for four-unit buildings.

Home buyers with good credit but a limited downpayment can secure a HomeStyle Flex loan. It allows a 3 percent downpayment toward after-rehab-value-based loans. Repair costs can account for up to 30 percent of that value.

A third option, HomeStyle Community Mortgage, includes more flexibility for low-income rehabbers. "It measures a family's expenses [relative] to its income," says Mr. Young.

It also allows rehab costs to account for 75 percent of the loan, and accepts borrowers who can pay 5 percent down, of which 2 percent can come from a gift, grant, or loan from a nonprofit or government agency.

More paperwork

Ultimately, HomeStyle's calculations require a little more paperwork and time from lending officers who write them.

Some loan officers may shy away from these loans because they have different guidelines and requirements, says Peggy Allen, a Chase Manhattan lending officer in Chicago.

The lender must approve the contractor for the project, for example, and must see competitive bids with detailed estimates.

"It involves working closely with appraisers to be sure they understand HomeStyle requirements," says Ms. Allen. "You don't just give them an address. These loans are based on as-is and after-rehab appraisals."

Money lent through the HomeStyle program does not go directly from the bank to the borrower.

It gets funneled to an escrow account, and the lender makes the payments to contractors once the work is done and approved by the lender.